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Blue Chips Lead the Dow Higher; Tech Stocks Struggle

August 09, 2000|From Times Staff and Wire Reports

The two-tiered market is back, but this time it's blue chips in the top tier.

The Dow Jones industrial average rose 109.88 points, or 1%, to 10,976.89 on Tuesday, its highest close since April 26.

Driven by a surge of buying in some "old-economy" shares and by a jump in Microsoft, the Dow's rally Tuesday was its seventh consecutive gain--the longest winning streak since December 1998.

Meanwhile, many technology stocks continued to struggle, leaving the Nasdaq composite index down 14.44 points, or 0.4%, to 3,848.55 for the day.

Overall, winners topped losers by about 16 to 13 on the New York Stock Exchange, while losers had a modest edge on Nasdaq. Trading was moderate.

Old-economy stocks, including some industrial issues, energy shares and utilities, have come alive in recent days as many tech issues have struggled to rebound after a late-July dive.

Despite the Dow's resurgence, some traders were disappointed that the stock market couldn't get more excited about the government's report of a big gain in second-quarter productivity--data that should add more weight to the argument that the Federal Reserve is finished raising interest rates.

The productivity gain, in the context of a slower economy, is another depressant on inflation pressures, economists said.

Indeed, brokerage Goldman Sachs said Tuesday that it no longer forecasts another Fed rate increase this year.

The bond market had a better day than Nasdaq: Longer-term yields fell in reaction to the productivity report, and as the Treasury Department got a good reception for its sale of new five-year notes.

The Treasury sold $10 billion in five-year notes at a yield of 6.06%. The bid-to-cover ratio, which gauges demand by comparing the number of bids with the amount of securities sold, was 3.06, the highest for five-year notes since June 1997.

Meanwhile, the yield on the 10-year T-note fell to 5.92% on Tuesday, from 5.96% on Monday. The government will sell new 10-year notes today.

On Wall Street, trading Tuesday was "not as robust as I thought it would be, given the strong productivity report," said John Shaughnessy, chief investment strategist at Advest Inc. in Hartford, Conn.

Still, he said the productivity report should have a calming effect on investors nervous about the Fed meeting Aug. 22.

One big beneficiary of the productivity data was the dollar: It reached an 11-week high against the euro, as many traders continue to view the U.S. economy as a better place to invest than Europe.

The euro fell to 90.2 cents from 90.8 cents Monday. It's threatening to slide toward its record low of about 89 cents in early May.

The falling euro is a gift to U.S. vacationers in Europe this month, giving them extra purchasing power.

Among Tuesday's highlights:

* The Dow was lifted by such heavy-industry names as GM, up $1.56 to $61.63; Alcoa, up $2.25 to $34.63; General Electric, up $1.13 to $53.75 and Eastman Kodak, up $2.38 to $60.50.

Also, Microsoft jumped $4.13 to $74.13. The company said Monday that it will resume buying back shares to issue to employees who have exercised stock options or purchased shares under company-sponsored programs.

* Home Depot led retail stocks higher, rising $2 to $57. Some traders said the gain reflected optimism that home sales may improve if mortgage rates come down.

Also gaining were Wal-Mart, up $2.50 to $57.63, and Best Buy, up $1.94 to $73.

* Many utility stocks continued to advance, pushing the Dow utility index up 0.9% to another new high. American Electric Power rose 94 cents to $35.38 and Texas Utilities added 30 cents to $34.63.

* Telecom stocks were a weak spot. Verizon Communications, the result of the Bell Atlantic-GTE merger last month, tumbled $5.38 to $42.50 after warning about near-term earnings.

That weighed on AT&T, which fell 56 cents to $29.94, its lowest since 1997; WorldCom, which sank $1.50 to $35.94; and SBC Communications, down $1.88 to $42.50.

* Among tech shares, Intel lost $1.31 to $61.63, Apple fell $1.19 to $46.75, Yahoo lost $2.38 to $134.13 and Broadcom gave up $6.19 to $241.75, while IBM added $2.75 to $118.88 and Oracle rose $1.13 to $83.

* jumped $1.03 to $6.06. The financial Web site said Vulcan Ventures, controlled by Paul Allen, and joined to invest $7.5 million in the firm.


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